Wednesday, 23 May 2007

7 Steps to Financial Freedom Part 1

Hi all,

It’s been another tiring week of work for me but still Financial Freedom does not leave my mind….therefore…. I present to you 7 steps to Financial Freedom! 7 is an easy number to remember right? heh heh…

You may read elsewhere about 5 steps, 10 steps or 100 steps to financial freedom, but I feel these 7 steps are really the essence compiled by ancient wisdom. These are really the timeless universal values for getting wealthy.

I will provide at the end of the article below my modern interpretation and implementation of these 7 values……

This post will reveal the first 4 values….enjoy :)

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Courtesy of Dennis Ng

If you want to improve your finances, “The Seven Cures For A Lean Purse” may interest you. It’s from the Book entitled “The richest man in Babylon”. “The Seven Cures for A Lean Purse” are actually ways whereby we can manage our money better and accumulate wealth and NOT 7 ways to get rich quick. I find it quite interesting, though the underlying principles are actually very SIMPLE.

1st cure:

“For every 10 coins you place within your purse (you earn), take out for use only 9. Your purse will start to fatten at once and its increasing weight will feel good in your hand and bring satisfaction to you.”

The 1st cure is actually quite simple, it actually means that for every dollar we earn, we should spend (maximum) of 90%, and keep (save) the 10%. For those who are already doing that or saving even more, then you are actually practising the 1st cure. Congratulations! Keep it up! Try saving 20% or even more!

2nd Cure:

“Budget your expenses so that you may have money to pay for your necessities, to pay for your enjoyments and to gratify your worthwhile desires without spending more than nine-tenths of your earnings.”

The logic is: since your current earnings is fixed (to a certain extent), the only way to ensure you can practise the 1st cure (ie. save 10% of your earnings) is by budgeting your expenses to make sure you do not spend more than 90% of your earnings! It’s as simple as that, but to do it on a long-term basis requires discipline.

Budget, not again, you may protest. I want to live a life whereby I can spend freely without worrying. But think deeper, actually no one can afford to do that! Because human beings’ desires are unlimited, but our means ($$$) is limited - even if you have S$1 bn, you can still have desires or things you want that can exceed that price tag!

Well, think about it, who will determine what constitutes necessities, enjoyment, luxury items in your budget, it’s you! So, you still have all the freedom to choose, right?

The 1st 2 cures basically tells us how we can save from our current income and accumulate “CAPITAL”. However, money in a purse EARNS NO RETURNS. Hence, the 3rd Cure is:

3rd Cure:

“To put each coin to work so that it may reproduce its kind and help bring to you income, a stream of wealth that shall flow constantly into your purse.”

ie. Make your money work for you!

If you think about it, if you are not born in a rich family or married/marrying into a rich family, the only way you can accumulate wealth is through your own means. There are only 2 ways to make money:

1. Men at work

2. Money at work.

Each of us has only 24 hours a day, there is a limit as to how much work we can do if we deduct time for sleep and for other activities, including spending time with our families/ourselves. So, the 3rd cure tells us that we should put our money to work, so that our CAPITAL can GROW.

4th Cure

The 3rd cure basically tells us that “we should make our money works for us, and not just sit in our purse earning nothing.” However, sometimes in a haste to make our money work, people are tempted by “GET RICH QUICK” scams or invest without understanding the RISK(S) involved and consequently suffered a LOSS. That is why the 4th Cure says::

“Guard your treasure from loss by investing only where your principal is safe, where it may be reclaimed if desirable, and where you will not fail to collect a fair rental.”

The 4th cure highlights to us that there is a RISK that all our savings may be gone if we INVEST without AWARENESS of the RISK(s) of our investment(s), Eg. foreign exchange risk (if invest in foreign currency), liquidity risk, interest rate risk, solvency risk etc. It tells us that the 1st sound principle of investment is security for your principal, ie. we should guard our principal from loss. However, we should also try to achieve a “fair return.” - balance risk against returns.

To be continued in Part 2

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Ok…here comes Janny’s modern interpretation and implementation of these 4 steps:-

Let’s take a look at the 3rd and 4th cures. The first 2 cures might be hard to implement fully by a man or woman on the street without much financial discipline and subjected to so many temptations nowadays to spend his or her money. Savings could be reduced to just a token sum of money. Especially for women, you have to agree with me that it’s just so hard to resist shopping, going for manicures and fine dining. :p

SO what next? To fully and successfully implement the 3rd and 4th cures, I am personally embarking on the programmes below which I have always been recommending and earning:

Do take note of the relationship between the 3rd and 4th cures. They are kinda contradictory but very real. As mentioned, many people have been scammed while pursuing the 3rd cure.

These few programmes which I have loyally recommended all this while have passed the 4th cure test. That is…they are LEGITIMATE.

The best thing is……these programmes require very minimum capital…if not none! Imagine you just started working and finding it hard to follow the 1st and 2nd cures, when would you ever have enough capital to implement the 3rd and 4th cures?

However, there’s no free lunch in this world, therefore, in exchange for low investment, some time and effort are necessary to gain and profit from these programmes.

No free lunch…yes..but remember…I once mentioned before, some people can get expensive lunches at a lower price than others. Which leads me to my next point….

The fortunate thing is that these programmes you can do it at your own flexible timing, unlike working for an employer. And remember what you earn from these programmes is not just money….but knowledge and experience!! (you don’t get knowledge and experience just by leaving your money in the bank or in some investment scheme) Money can be robbed stolen and spent but not knowledge and experience…unless you are killed or go crazy :)

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About Me

A simple girl interested in sharing financial tips and news from the United States and Singapore. Many people focus on how to get rich. But some forget that their eventual objective is to be happy. And some also forget that the best way to be free from poverty and maintain wealth after getting rich is to be free from scams.